What is financial consolidation and why is it happening in Europe?

Financial consolidation refers to the merging of banks, insurers, and asset managers through acquisitions and mergers. It's accelerating in Europe as financial institutions seek greater scale to compete globally, improve profitability, and invest in new technologies. The recent BNP Paribas acquisition of AXA Investment Managers is a prime example, creating one of Europe's largest asset management platforms and signaling more deals may follow.

How do M&A deals typically affect stock prices?

When merger and acquisition (M&A) deals are announced, target companies often see their stock prices rise significantly as acquirers typically pay a premium over the current market price. Acquiring companies may see mixed reactions - sometimes their stocks rise if investors believe the deal creates value, or fall if the price paid seems too high. Companies rumored to be potential targets may also experience price increases as investors speculate on possible deals.

What's the difference between a potential acquirer and target in this theme?

Potential acquirers in this theme are typically larger financial institutions with strong balance sheets that can fund acquisitions. They're looking to expand their market presence, add new capabilities, or enter new markets. Potential targets are companies with valuable franchises, specialized services, or strong market positions that make them attractive acquisition candidates. Some companies could play either role depending on the specific deal dynamics and market conditions.

What is an ETF like EUFN and how does it fit in this theme?

EUFN is an exchange-traded fund (ETF) that holds a basket of European financial stocks. It provides diversified exposure to the entire sector rather than requiring you to pick individual winners. In the context of financial consolidation, an ETF like EUFN lets you benefit from the broader trend of merger activity across all European financials, as M&A deals tend to lift valuations across the sector, not just for the specific companies involved in deals.

15 handpicked stocks

European Financial Consolidation

BNP Paribas's acquisition of AXA Investment Managers could trigger a wave of mergers in European finance. These carefully selected stocks represent potential buyers and targets in banking, insurance, and asset management as the industry reshapes for the future.

Han Tan | Market Analyst

Updated 2 days ago | Published at July 2